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Commerzbank Suitors Line Up as Deutsche Bank Discussions Drag On

(Bloomberg) -- As merger talks between Deutsche Bank AG and Commerzbank AG appear to run into more obstacles, potential suitors are jockeying for a piece of the German banking market should government efforts to create a national champion fail.

Commerzbank, the smaller of the two, is attracting the most interest, perhaps because it would be easier to digest. Dutch lender ING Groep NV has reached out to the bank and the German government to seek talks, and UniCredit SpA is weighing a potential bid, people familiar with the matter have said.

The German Finance Ministry, which oversees the country’s roughly 15 percent stake in Commerzbank, has encouraged the firm’s negotiations with Deutsche Bank.

For more on the ongoing talks with Deutsche Bank, read this.

Yet some within Germany’s government -- which owns roughly 15 percent of Commerzbank -- are critical of a national merger and would prefer a European solution. But the lack of a European deposit insurance scheme and a still-fragmented capital market in the region are posing big hurdles for a cross-border takeover. That’s less of a problem for banks that already have a large presence in the German market and are looking to expand there.

Here are some potential suitors that have emerged or are likely to emerge for Commerzbank should its talks with Deutsche Bank collapse:

ING Groep

Ralph Hamers, chief executive officer of the biggest Dutch bank, has reached out to his Commerzbank counterpart, Martin Zielke, and to the German government in an effort to start discussions. Hamers even pledged to cut fewer jobs than a Commerzbank-Deutsche Bank deal would require, and to move ING’s headquarters to Frankfurt from Amsterdam, according to Manager Magazin, which first reported the talks. Zielke rejected formal discussions but hasn’t broken off contact completely, the publication said.

ING already ranks among the biggest retail banks in Germany with more than 8 million customers, and its online-only strategy there might fit well with Commerzbank’s Comdirect business. A deal would also bolster ING’s push into corporate banking in Germany. The potential to cut costs is lower because ING doesn’t have any branches in Germany.

UniCredit

Italy’s UniCredit has considered making a bid for Commerzbank and could approach the German lender if talks with Deutsche Bank fall apart, a person familiar with the matter said. The multibillion-euro plan under deliberation involves buying a sizable stake in Commerzbank and merging it with HypoVereinsbank, which UniCredit already owns, according to the Financial Times, which broke the news.

A representative for UniCredit declined to comment.

A takeover would probably face opposition from the German government because of UniCredit’s significant exposure to Italian sovereign debt, so a transaction would probably require a complex structure. UniCredit executives held discussions with German officials about Commerzbank in 2017, a person with knowledge of the matter said at the time.

Combining HypoVereinsbank with Commerzbank would give Unicredit or any other buyer greater access to the so-called Mittelstand companies, or the mid-sized businesses that are the backbone of the German economy.

BNP Paribas

Like UniCredit, BNP Paribas SA is said to have held talks already in 2017 with the German government about buying its stake in Commerzbank. The French lender emerged largely unscathed from the turmoil that rocked its European peers over the past decade, and banking executives have speculated that CEO Jean-Laurent Bonnafe may now consider dealmaking to accelerate his expansion.

A takeover of Commerzbank would create a Franco-German entity that dwarfs Deutsche Bank in terms of revenue and earnings. A spokeswoman for BNP said the bank has no acquisition plans.

Santander

Banco Santander SA executives would be interested in making an approach if they believe the price to be right, people familiar with the matter said. They find Commerzbank appealing because it could help buttress their expansion in Europe, the people said. The Spanish lender is the largest bank in the euro zone, and could potentially digest Commerzbank even after paying a premium for the asset.

Like ING and UniCredit, Santander is already present in Germany, and its focus on consumer lending could square with that of Commerzbank. Chairman Ana Botin has said that “consolidation is going to happen” though banks would need an integrated European market for services for cross-border banking to work. Botin didn’t specifically address a potential Commerzbank tie-up and a spokesman declined further comment.

SocGen

Societe Generale SA is among European lenders that have weighed whether to make an approach to Commerzbank if German consolidation plans don’t succeed, a person familiar with the matter said. There’s no certainty the French lender will make an approach, the person said.

Earlier this month, SocGen Chairman Lorenzo Bini Smaghi said the bank “wants to be a protagonist” in European cross-border consolidation, which he said was important for financial stability of the euro area and to compete with U.S. rivals. His firm is the only one among France’s top three banks that doesn’t have a retail base in another euro-area country.

A SocGen spokesman said the bank wouldn’t comment on market rumors.

UBS

UBS Group AG Chairman Axel Weber in Davos told the world elite that European banking needs consolidation, though he also said that his firm wouldn’t participate.

A purchase of Commerzbank could give the Swiss bank access to top business customers in Germany, while also adding a new base of potential clients for UBS’s wealth business. But UBS, which was bailed out by the Swiss government after the financial crisis, may face opposition to any large acquisitions from its own regulators.